Putin can­cels new gas pipe­line to Europe

Lesotho Times - - International -

MOSCOW — In a mea­sure of the dra­mat­i­cally re­shaped re­la­tions be­tween Rus­sia and the West, Rus­sian Pres­i­dent Vladimir Putin on Mon­day scrapped plans for a ma­jor new nat­u­ral gas pipe­line to Europe, a sur­prise decision that came as the ru­ble slumped to an all-time low against the dol­lar.

The move de­prives the Krem­lin of a tool that would have in­creased Rus­sian po­lit­i­cal in­flu­ence over south-east­ern Europe and de­toured nat­u­ral gas around Ukraine, leav­ing it more vul­ner­a­ble to Rus­sia.

Mr Putin’s decision came after Euro­pean Union lead­ers in­ten­si­fied their op­po­si­tion to the plans be­cause of the grind­ing con­flict in Ukraine.

Mr Putin said Rus­sia would build a smaller pipe­line to Turkey in­stead of the big­ger project, for which con­struc­tion started two years ago, to fun­nel large quan­ti­ties of Rus­sian gas un­der­neath the Black Sea to Europe.

The can­cel­la­tion ap­peared to end an era, at least for now, in which Rus­sia pur­sued grand, ex­pen­sive in­fra­struc­ture projects in Europe that gave it po­lit­i­cal clout through en­ergy sup­plies.

The decision fol­lows a drop in the price of oil by more than 30 per­cent since the sum­mer, starv­ing Rus­sia of rev­enue and forc­ing it to cur­tail its eco­nomic am­bi­tions.

“If Europe does not want to im­ple­ment the project, then it won’t be im­ple­mented. We will re­fo­cus our en­ergy re­sources to other parts of the world,” Mr Putin said Mon­day in the Turk­ish cap­i­tal, Ankara, after a meet­ing with Turk­ish Pres­i­dent Re­cep Tayyip Er­do­gan.

“It would be ridicu­lous for us to spend hun­dreds of mil­lions of dol- lars on the project, go all the way through the Black Sea and then stand in front of the Bul­gar­ian bor­der,” since Bul­garia’s new gov­ern­ment has op­posed the project.

The decision capped seven years of plan­ning and bil­lions of dol­lars of Rus­sian in­vest­ment lay­ing the ground­work for the $19 bil­lion (M206 bil­lion) project, which would have by­passed Ukraine in a new route for Rus­sian gas into Europe.

As re­cently as a few weeks ago, Rus­sian of­fi­cials said con­struc­tion on the un­der­wa­ter Black Sea sec­tion of the pipe­line would be­gin within months.

Rus­sian lead­ers had ar­gued that the new south­ern gas route to Europe would have shielded EU con­sumers from en­ergy dis­putes be­tween Ukraine and Rus­sia.

Be­fore this year, Rus­sia twice cut off the gas to Ukraine in deep win­ters, in 2006 and 2009.

But Euro­pean lead­ers this year have con­cen­trated more on de­creas­ing their de­pen­dence on Rus­sian en­ergy rather than con­sum­ing more of it.

EU coun­tries rely on Rus­sia for about 30 per­cent of their nat­u­ral gas. Lithua­nia just un­veiled a vast liq­ue­fied nat­u­ral gas ter­mi­nal that will al­low it to di­ver­sify its sup­pli­ers.

And after Rus­sia cut gas flows to Ukraine in June, Ukraine’s neigh­bours tried to help by send­ing gas through pipe­lines that usu­ally flow in the op­po­site di­rec­tion.

The South Stream pipe­line, which Mr Putin can­celled Mon­day, had been in­tended as a south­ern com­ple­ment to the Nord Stream pipe­line, which links Rus­sia and Ger­many, by­pass­ing the Baltic states.

That project, which opened in 2011, also helped de­crease re­liance on Ukraine for ship­ments of nat­u­ral gas.

EU of­fi­cials had raised ob­jec­tions to the com­pan­ion project, say­ing that, as planned, it would vi­o­late com­pe­ti­tion rules.

Lead­ers wor­ried that it would both in­crease Euro­pean de­pen­dence on Rus­sian gas and leave Ukraine dan­ger­ously ex­posed to Rus­sian cut-offs.

Op­po­si­tion from Bul­garia’s new gov­ern­ment, which was elected in Oc­to­ber, ap­peared to deal the fa­tal blow to the Rus­sian ef­fort.

Mr Putin said the al­ter­na­tive pipe­line would run through Turkey and end in a hub near the Greek bor­der.

Western sanc­tions against Rus­sia have also made for­eign in­vestors wary of ties to ma­jor Rus­sian state-owned com­pa­nies, in­clud­ing Gazprom, the nat­u­ral gas gi­ant that was lead­ing the ef­forts to build the pipe­line.

Re­stric­tions on long-term lend­ing to ma­jor Rus­sian banks have made it dif­fi­cult for Rus­sian com­pa­nies to raise money for new projects.

With the price of oil drop­ping, some an­a­lysts said Rus­sia may sim­ply be trim­ming its am­bi­tions.

On Mon­day, the ru­ble lost up to five per­cent of its value against the dol­lar be­fore set­tling closer to a 2.5 per­cent loss for the day. It is down 37 per­cent this year, and the de­cline is closely tied to oil prices.

“The oil price col­lapse may have some­thing to do with the tim­ing of this an­nounce­ment,” said Ed­ward Chow, an en­ergy ex­pert at the Cen­ter for Strate­gic and In­ter­na­tional Stud­ies. “They can’t af­ford to call the EU’s bluff any­more.”

— Wash­ing­ton­post

A UKRAINIAN worker op­er­ates a valve at a gas stor­age point. The Krem­lin de­toured nat­u­ral gas around Ukraine, leav­ing it more vul­ner­a­ble to Rus­sia.

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